Related Events

Kent County Administrator and Controller Daryl Delabbio said he will look into every nook and cranny of the 2012 general operating budget over the next few months to find spending reductions.

Delabbio began that search in February by acting on a request made by Commissioner Harold Voorhees, also chairman of the Finance Committee. Voorhees asked for and has been granted a series of morning meetings with Delabbio and Fiscal Services Director Steven Duarte, who tell the committee where county spending is mandated, where it’s discretionary and what the funding sources are for each. Four meetings have been held so far.

“It was his idea and I think it’s a good one because we just updated the mandates’ study late last year,” said Delabbio of the 130-page report. “Plus we have new commissioners, and this gives everyone an opportunity to see how many services and programs the county does provide.”

A couple of challenges the county faces in putting together next year’s budget are an expected decrease in property-tax revenue and a likely drop in statutory revenue sharing, which could reach $4.5 million. Also, the federal government may lower the amount of Community Development Block Grant funds the county receives. Plus, the 2012 budget has to have a fund balance of 40 percent.

“With the anticipated reduction in property taxes and with an anticipated reduction in state revenue sharing — that’s where it becomes a challenge,” said Delabbio of having to set aside a reserve fund of 40 percent.

“But that is one element the rating agencies take into account, and it offsets some of the weaker areas that we might have, like per-capita income, or the economy, or by being in the state of Michigan. Those are things that could potentially affect the credit rating. Because of the strong fund balance that we’ve historically had, that has mitigated any negatives,” he added.

The county has held a Triple A credit rating, both short and long term, for nearly a decade. Delabbio, Commission Chairwoman Sandi Frost Parrish, Treasurer Kenneth Parrish and Duarte travelled to New York last week to make a pitch with Standard & Poors and Moody’s Investors Service to extend the county’s top rating another year.

One mandated expenditure the committee discussed last week was the bonds the county issued for the construction of DeVos Place about a dozen years ago. There were two packages: one for roughly $90 million and another for $5 million. At the time they were issued, the lodging excise tax fund was chosen to make the bond payments because the account had seen an annual revenue growth of 9 percent for 15 years. The county back-loaded the interest rate to maximize the bond issues and faces about an $11 million payment in 2031, the year the larger bond reaches maturity.

But that revenue growth stopped in 2001 after the Sept. 11 terrorist attacks, as the depression that followed crippled the travel industry. Over the past three fiscal years, the county has subsidized the tax fund with $4 million from the general operating budget to meet the fund’s expenditures — the largest of which is the yearly payment on the larger construction bond. It is $5 million this year. Payments on the smaller bond have come from the general fund for the past several years.

Delabbio told the committee last week that the county has looked into refinancing the larger bond and, because the issue isn’t callable, a bond swap appears to be the county’s only refinancing option. A swap means the county would sell the bond and use the proceeds from the sale to buy another bond. “You’re hedging your bet on the growth of interest in the future,” said Delabbio. “I think the project was solid. (But) I think we could have been more conservative.” He added that every bond the county has issued since the DeVos Place bonds have been callable, which allows the principal amount and accrued interest to be paid before the maturity date.

A discretionary expenditure, which also is paid through the lodging excise tax, is $200,000 to support the West Michigan Sports Commission. Commissioners agreed to fund WMSC with $1 million for five years to get it running, and this is the final year for that funding. Commissioner Dick Vander Molen, who also chairs the WMSC, said he didn’t think the organization could survive without financial backing from the county. “I don’t think the support is ever going to go away,” he said. Vander Molen added that fiscal support from the private sector for the WMSC has dropped off in recent years.

Another discretionary spending item that may be looked at is the county’s funding of The Right Place Inc. Kent provides the region’s economic development organization with $85,000 a year and has funded it for most of the 26 years it has been around. “They do a lot in the area of retention, and there are property taxes involved with that,” said Delabbio. Property tax is the county’s largest revenue source.

The committee will be getting together again next week to continue its exploration into mandated and discretionary spending. Craig Paull, director of the county’s information technology office, is expected to give the committee an update on where the department is and where it might be going over the next few years. Commissioner Jim Talen said last week he has some thoughts about outsourcing some of the department’s work that he wants to share with Paull and committee members.

Delabbio told the committee the IT department was in pretty good shape, but probably not at the level the county would like it to be because a handful of employees were laid off a few years ago. At the same time, Delabbio emphasized the importance the IT office holds for the future, not just for the county but for other governmental units such as townships. “This is the foundation for any consolidation effort. The systems are built on technology,” he said.

Commissioner Jim Saalfeld agreed, but pointed out that getting everyone logged on to the same platform will be costly. “I think you’re right,” he said to Delabbio. “But it’s going to be very expensive.”

Restricted Content

About GRBJ

Since 1983, the Grand Rapids Business Journal has been West Michigan's primary and most-trusted source of local business news. The weekly print edition of the Business Journal, a must-read for the area’s top decision-makers, is known as the business newspaper of metro Grand Rapids, Holland, Muskegon and all of West Michigan.

grbj.com provides the same trusted and objective business reporting that the Business Journal is known for -- plus real-time original content, timely enewsletters/alerts, exclusive blogs and more. Business Journal subscribers receive the weekly print edition, including bonus publications like the annual Book of Lists, and also complete access to all content on grbj.com.

The Grand Rapids Business Journal is published by Gemini Publications.